Criticism of private health insurance exchanges

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August 22, 2015 by Tony Novak

Employee Benefit News published several comments this week critical of private insurance exchanges:

“I have yet to speak to any actuary, underwriter or broker that has given me any logical argument or factual study that shows private exchanges save anyone any money, other than of course the employer who shifts costs or risks to their employees.”

“I don’t know if our industry has ever had a more loosely used term than ‘an exchange.’ Most of the public hear this term and assume something that would look very much like the public exchanges they read and hear about in the news.”

“They do not assume that it is a ben-admin system paired with a handful of medical options from a single carrier with rates designed to drive everyone to the CDHP plan and then offer a bunch of high commission voluntary benefit options that can be elected to fill in the coverage gaps. Our industry uses much more flowery lingo, but at the end of the day, this is what private exchanges are.”

We agree with all of these criticisms. Technology is clearly being used to bend the insurance purchase process and maximize overall profits for the insurance enrollment companies. Yet the same can be said for any online seller in any market. There is a proverbial saying “In the land of the blind, the one-eyed man is king”. It appears that in this market environment dominated by unreasonable medical costs, unattractive insurance products and a low level of overall service, the private insurance exchange system is the best available option to most businesses today.

The most obvious suggestions to improve the current private insurance exchange system are: 1) insist on using an insurance exchange with multiple carriers and 2) provide employees with access to an independent health benefits adviser who is not affiliated with an insurance company. Agents or employees of any exchange or an insurance company may be excellent sources of technical information and are highly skilled at enrolling members but their advice is, by definition, conflicted with regard to the merits of the choices and the options available.

The Members Insurance exchange here at Freedom Benefits offers most (but not all) of the primary insurance options available through public exchanges. The supplemental coverage options and alternate primary coverage options are offered on a level field without being pushed by agents. Independent help is available from an adviser through the OnlineNavigator program outside of the private insurance exchange or the insurance company.

While no health insurance platform is perfect, I feel that the Freedom Benefits model is “as good as it gets” under the United States’ current legal and market framework.

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